Winegrapes in the San Joaquin Valley

Jim Lapsley, Ph.D.

Researcher, Agricultural Issues Center

Adjunct Professor, Vit and Enology, UCD

Important Points

• Growers do choose across crops and future profits are a significant part of that choice

• Winegrape’s relative profitability has been challenged, especially by tree nuts

• Current and projected record-high prices for annual crops raise another challenge to winegrape acreage

• Higher winegrape prices will likely be needed to encourage planting of winegrapes

• Global competition offers winemakers and drinkers alternatives to higher-priced winegrapes from the southern San Joaquin valley

21

Esterby Rancho Development 1880s

Grapes were promoted as the most profitable crop in

California in the 1880s, leading to major plantings.

Below a prosperous Fresno grape farmer (on left) is

contrasted with a wheat farmer on the right.

50 years of Almonds, Winegrapes, Cotton

0

200000

400000

600000

800000

1000000

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State Acreage

Almonds Winegrapes Cotton

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Value (millions)

Almonds Winegrapes Cotton

About 85% of California’s almond and cotton acreage and 50% of winegrape acreage are in the San Joaquin Valley, (winegrapes down from 60% in 1980).

Topics to Cover

• Competition

• Acreage Trends

• Revenue and Average Returns per Acre

• Consumption Trends

• Implications for Winegrapes

Thinking about Competition for Winegrapes

• Competition from other growers of the same crop – Other areas of state?

– Other countries growing winegrapes?

• Competition from other crops in your area for use of land – Farming expertise?

– Water use of crop?

– Land suitability?

– Agglomeration effects?

Gross Revenue per Acre

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500

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1980 1985 1990 1995 2000 2005 2009

Almonds

Cotton

Winegrapes

5 Year Weighted Average Returns per Acre San Joaquin Valley, 2005-2009

Almonds Winegrapes Cotton

Establishment 4839 6746 0

Total Cash Costs 2761 2603 1073

Gross Revenue 3747 2571 1190

Difference 986 -32 17

Costs do not include non-cash overhead expenses such as interest on land or depreciation of vineyard/orchard establishment. Gross revenue is derived from County Ag. Commissioner reports and is a 5 year (2005-2009) weighted average.

Bearing Acres San Joaquin Valley

0

200000

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1000000

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1600000

1980 1985 1990 1995 2000 2005 2010

Almonds

Cotton

Winegrapes

50

70

90

110

130

150

170

190

210

230

250

19

95

19

96

19

97

19

98

19

99

20

00

20

01

20

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pri

ce p

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n (2

00

3-4

=10

0)

Cotton

Wheat

Corn

Indexed U.S. prices for upland cotton, wheat, and maize, 1995-2010 with projections through 2020 (2003-2004 = 100) USDA Projections

Consumption Trends?

California Domestic Shipments

209 209 240

292 312 331 304

368 394 411

450

392 387 401 417 428 441 448 457 466 467 474

Millions of Pounds or Gallons

Almonds Wine

Source: Wine Institute and California Almond Board

Total California Shipments (Domestic and Export)

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Millions of gallons or pounds

Almonds

Wine

The World Matters for Both

Almonds Wine

% World Production 80 7

% California Production Exported 70 17

% of World Shipments 90 4

Two ways of looking at these numbers: 1. Since there is a large demand for wine in the world, California producers have

a major opportunity to increase volume if they can compete with other producers. In contrast, California almond producers may well face increased international competition and lose market share.

2. International demand is still growing for Almonds and California has brand recognition. In contrast, demand for wine is stable or shrinking and major old world producers dominate

Future Demand for Wine in the U.S.?

Lapsley’s predictions for 2030

• Population and per capita consumption will both increase—leading to a 45% increase in volume

• A 2030 market of 407million cases is an increase of 125 million cases, requiring 1.75 million tons of grapes

• Assuming California supplies 60%, and that half sells at $5 a bottle or below, the San Joaquin valley needs to expand production by 500,000 tons, or 42,000 acres at 12 tons/acre

• Total acreage is down by about 50,000 acres

Bearing Winegrape Acreage San Joaquin Valley

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1995 2000 2005 2010

Lodi

South SJ

So how will wineries meet demand?

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’s li

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Bulk Wine Imports and Price per liter

$/liter

Volume

The future of Winegrapes in districts 13 and 14?

• With average yields of over 12 tons/acre, the region is very productive but is in competition with other bulk wine producing regions of the world.

• Of the 92,000 acres currently planted in districts 13 and 14, 91,000 are over 10 years old and will probably be pulled by 2030.

• Will those acres be replanted and another 40,000 added to meet my projected increased demand—or will wineries meet demand by importing bulk wine?

• Replanting is probable only if major wineries commit to long-term contracts and if California winegrapes can compete with winegrapes grown elsewhere.

Conclusion?

• San Joaquin winegrape growers are excellent farmers.

• They probably can out compete foreign producers in the long run

• In the short term, can perennial crops compete with annuals?

• When it comes time to replant, can grapes out compete nuts?